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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CMC Markets Plc (LON:CMCX) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, CMC Markets investors that purchase the stock on or after the 5th of December will not receive the dividend, which will be paid on the 9th of January.
The company's next dividend payment will be UK£0.031 per share, and in the last 12 months, the company paid a total of UK£0.10 per share. Based on the last year's worth of payments, CMC Markets has a trailing yield of 3.8% on the current stock price of UK£2.765. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether CMC Markets has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for CMC Markets
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately CMC Markets's payout ratio is modest, at just 34% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see CMC Markets's earnings have been skyrocketing, up 72% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CMC Markets's dividend payments are effectively flat on where they were eight years ago.
To Sum It Up
Is CMC Markets an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, CMC Markets appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.